Wednesday, August 3, 2011

Legging into a Riskless Spread

– Posted in: Tutorials

A feisty Silver Wheaton got nearly all of the attention during this session, since we hold a partial butterfly spread in the stock. One more trade is needed to complete the position, and once we’ve shorted some September 46 calls against what we already hold, we’ll have a virtually riskless bet on SLW’s continuing rise into early autumn. We also looked at the stock as a possible trade in real time, since it was stealing up on an opening-bar peak that obviously had trapped many bulls (and short-covering bears).

CZ11 – December Corn (Last:716.25)

– Posted in: Current Touts Rick's Picks

The futures never quite made it down to our 652.50 bid, although deft camouflageurs could have found some risk-averse ways to get on board not long after the actual low occurred at 665.50.  The current rally projects to 753.50, or perhaps to 791.50 if any higher, so there are good reasons to keep trying if you're on the sidelines and looking to climb aboard.

ESU11 – September E-Mini S&P (Last:1247.50)

– Posted in: Current Touts Rick's Picks

For the last seven hours, the futures have been screwing the pooch near 1246.75, a Hidden Pivot target that I disseminated in the chat room yesterday with the futures trading nearly 20 points higher.  You should trade this tedium only out of acute boredom, but please note that just a little more downside -- specifically, anything below the 1237.50 low recorded on St. Patrick's Day, would generate an impulse leg powerful enough to sound the death knell for the 29-month-old Mother of All Bear Rallies.

SLW – Silver Wheaton (Last:37.45)

– Posted in: Current Touts Free Rick's Picks

We hold four September 42 calls @ 1.32 and four September 50 calls @ 0.26 that will turn into a risk-free bullish butterfly spread if and when we are able to short eight September 46 calls for 0.79 or better.  Continue to offer the calls good-till-canceled, since a short-squeeze opening could cause them to fill at our price or even higher.  FYI, the rally from Friday's low has the potential to hit 41.13 (daily, A=34.54, B=40.24) if the stock closes for two consecutive days above 38.28, a Midpoint Pivot.  For your interest, I've used Larry McMillan's option calculator (see inset) to determine approximately how much the stock would have to sell for in order for the September 46 calls to be trading at our short-offer price of 0.79.  The fact that the calls were selling for around 0.45 yesterday with SLW at 37.45 gives them an implied volatility of 50.8.  If you plug that volatility into the calculator and run the stock at 39.35, it yields a theoretical value of 0.79 for the calls. In practice, however, if the stock takes a few days to climb to 39.35, call volatility would likely diminish, requiring SLW to somewhat exceed 39.35 to get our option order filled.

SIU11 – September Silver (Last:40.800)

– Posted in: Current Touts Free Rick's Picks

Most immediately, there's a 42.290 target that should be easily achieved now that the rally has begun a consolidation above its midpoint sibling, 40.665.  If the target is hit, that would refresh the bullish energy of the hourly chart by surpassing the look-to-the-left peak shown. It would also put into play a Hidden Pivot at 44.285 that is the D target of a larger pattern:  A=34.810 (July 12), B-40.880 (July 19).  Want to learn how to calculate these targets and use them to leverage trades yourself? Click here for details concerning the upcoming Hidden Pivot webinar.

GCQ11 – August Gold (Last:1655.80)

– Posted in: Current Touts Rick's Picks

Bulls had to like the way yesterday's runaway rally pushed past the 1658.30 target shown in the chart. It is a target of slightly higher degree than the one at 1650.30 that we were using as a minimum upside objective, and its breach has put into play an even more significant target at 1728.00.  That number can serve as a minimum upside projection for now, although we'll continue to monitor corrections on the lesser charts for signs of fatigue.  In practice, that would mean abc patterns that decisively exceed their 'd' targets. One such pattern in progress after hours was bullishly having difficulty taking out a midpoint support at 1654.90 (5-minute, a=1660.40 at 7:10 p.m. EDT).

Deal Has Something for Everyone to Hate

– Posted in: Commentary for the Week of March 8 Free

Were we perhaps too hasty in condemning the debt-ceiling bill? Evidence surfaced yesterday that it may not be such a bad piece of legislation after all. First, stocks took their steepest dive in recent memory, sending the Dow Industrials 266 points lower.  It was like watching a little brat who enjoys setting the curtains on fire and torturing toads get a good spanking.  Then we came across the news story Tycoons Laughing All the Way to the Bank linked at the blog of one of our oldest, dearest – and most politically Progressive -- friends, Glenn Klotz.  “The wealthy and their huge international corporations own Washington now and do as they please,” wrote Glenn, a conscientious man of the left -- although perhaps no longer an Obama supporter. “Democracy is DEAD. The Republic is DEAD. In its place is a Corporate Plutocracy.”  In other words, the status quo has been nicely preserved, snatched from the jaws of a Congress that briefly appeared hell-bent on – ugh! – fiscal reform. So, if Wall Street fears the bill, and the hard left thinks Obama and the Democrats have sold out to “the rich,” then how bad can it be, really?  A law that we can all hate for one reason or another sounds a lot better to us than one that has pleased, for starters, Harry Reid’s flock. And did we mention that Rep. Bernie Sanders, the only declared socialist in Congress, voted against it?  That kind of news deserves to be celebrated with a shot and beer, not debated.  And consider a side-benefit we’ll all enjoy once Mr. Obama has signed the bill into law:  The story will be off the front page, finally – replaced by news that the polar ice caps are still melting, that politicians and movie stars